Economist, Dr. Ebo Turkson has advised that Ghana delays any attempt to devalue the cedi until such a time that the country develops capacity to grow its exports.
He argues that the country risks distorting its balance of trade eventually due to the possibility of excess imports compared to exports.
Even though Dr. Turkson admitted to the economic benefits accruing from a falling currency, he explains that Ghana should work to get its timing right.
“We need to put in place measures to ensure that we have the capacity to respond to the opportunities that come with the depreciation of the currency and until that happens, it is not going to make any meaningful impact on our exports,” he stated.
The CEO of the African Tiger Holdings, Henry Wientjis has suggested that the country capitalizes on a devalued currency to grow exports.
According to Mr. Wientjis, this will help Ghana develop critical sectors to its economy particularly the agricultural sector.
Mr. Wientjis made the remarks at Citi Fm’s Investment Opportunities Forum where he lamented the apparent neglect of opportunities to diversify the Ghanaian economy and enhance the growth of businesses.
But Dr. Turkson explains to Citi Business News the move could only be adhered to when the economy supports massive exports.
“Because we are import dependent and we do not have a lot of domestic substitutes for imports, only devaluing the currency, imports become more expensive and the expectation is that people demand more substitutes for those imports.”
“When they don’t have the substitutes, they will go on increasing the value of imported goods and it will worsen our trade balance instead of improving it. So I do not think Ghana is ready for such a policy,” he added.
Figures released by the Bank of Ghana have shown that the cedi depreciated between 1 and 6 percent against major trading currencies as at the end of May this year.
The Central bank has most of the time resorted to some forex rules to guide the supply and demand of foreign currencies.
Reacting to concerns that these measures may not be sustainable as they are largely artificial, Dr. Turkson maintained that the option has become apparent because of the distortions the cedi’s free fall causes the local economy.
“When the cedi depreciates, it causes too much to the economy and that is why they will have to do that so far as it is not creating a lot of problems in the central bank’s account…We are unable to increase supplies to correct the situation, and thereby worsen our trade balance,” Dr. Turkson asserted.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana